Private & Commercial Norway

Private & Commercial Norway sells insurances to private households and small and medium-sized enterprises in Norway under the TrygVesta and Enter brand names. Sales are handled by 85 franchise offices, our own sales agents, three regional customer centres, 35 local sales centres, car dealers and Nordea’s branches. Private & Commercial Norway has around 1,100 employees and some 300 franchise office staff.

Financial results in 2008
In 2008, we succeeded in reversing the negative trend in gross premiums from 2005-2007 to growth. As a result of the positive trend, TrygVesta was able to retain its market share in 2008. This could be viewed as an indication that the many initiatives, particularly in the Oslo region, are beginning to pay off.

The technical result amounted to a profit of DKK 315m in 2008 compared with DKK 692m in 2007. The perfor­- mance was adversely affected by high claims inflation and a higher number of fires in single-family houses as com-pared with previous years. Moreover, Private & Commercial Norway recorded run-off losses of DKK 32m in 2008 as compared with run-off gains of DKK 81m in 2007.

From minus to plus
Private & Commercial Norway recorded a gross premium increase of 4.8% in local currency terms (3.3% in DKK terms) to DKK 4,636m, as against a decline in gross premiums of 0.2 percentage point in local currency terms in 2007. The DKK 146m increase was attributable to a combination of rising customer loyalty and increased sales in several regions, particularly in the Oslo area.

Gross premiums were also favourably affected by the premium increases implemented since mid-2007 on motor and building policies in particular. Private & Commercial Norway has scheduled additional premium increases in 2009, which will contribute to further growth going forward. The retention rate improved further in 2008 to 86.9 from 85.8 at 31 December 2007, and Private & Commercial Norway recorded a rising retention rate for large customer relationships in particular. Customer loyalty has been growing since Private & Commercial Norway changed its price and loyalty model in 2005/2006.

In 2008, the net number of policies rose by 58,000. All TrygVesta’s franchise and sales offices have applied a new customer system, ‘Salgsnøkkelen’, since the spring of 2008, which has significantly eased the administrative selling routines. Moreover, the growth in sales has entailed an increase in sales and commission expenses. Going forward, this development will generate higher premium growth rates, thereby strengthening TrygVesta’s position and market opportunities in Norway.

Claims
Claims expenses at DKK 3,371m were 13.8%, or DKK 409m, higher, and the claims ratio, net of ceded business, increased from 67.8 to 74.2. The increase was mainly attributable to an increase in medium-sized building and fire claims. In 2008, expenses for fires in single-family houses in Norway totalled NOK 264m, which was substantially above the level of previous years, as indicated in the chart. Fires in single-family houses are far more frequent in Norway than in Denmark, due to the fact that many houses and cabins in Norway are made from wood and heated by electric heating and wood burning stoves or fireplaces. Large claims, defined as claims in excess of DKK 10m, totalled DKK 131m, as against DKK 121m in 2007. As a percentage of gross earned premiums, large claims thus amounted to 2.8% compared with 2.7% in 2007.

The claims frequency for motor policies rose by approximately 1 percentage point relative to 2007, and the average claim was up by around 4 percentage points. The average claim tracks the general development in payroll and material costs. TrygVesta’s cooperation with selected garages which repair three out of four motor claims ensures high quality and lower costs per repair.

The claims frequency for building policies rose by approximately 2 percentage points in 2008, and the average claim was up by 7 percentage points, driven by higher payroll and material costs. The index for construction costs in Norway declined in the second half-year of 2008, and this development is expected to impact the performance of average claims in the upcoming quarters. The provisions for claims increased by a net amount of DKK 32m in 2008 as compared with a DKK 81m run-off gain in 2007. This corresponds to an adverse impact on the combined ratio of 0.7% in 2008 relative to a favourable impact of 1.8% in 2007. In particular, provisions for building and group life insurances were strengthened.

Expenses
Expenses rose by 7.3% or DKK 68m (6% or DKK 56m excluding expenses relating to “The Living House”) to DKK 1,004m, and, as a result, the expense ratio was up from 20.8 to 21.7. The increase was primarily attributable to higher selling commission costs, wage inflation of around 8% and expenses of DKK 12m incurred in connection with “The Living House” in the fourth quarter of 2008. Excluding expenses relating to “The Living House”, the expense ratio was 21.4 in 2008.

Combined ratio affected by claims inflation
Overall, the combined ratio was 95.9 in 2008, as against 88.6 in 2007. A large part of this difference was attributable to the higher run-off gains in 2007. Moreover, the increase in the combined ratio relative to 2007 was attributable to higher expenses for fires in single-family houses and underlying claims inflation. The premium initiatives implemented since mid-2007 in several areas are expected to improve profitability in the upcoming period.